UK construction cools again in May, bottlenecks seen - Markit

LONDON Tue Jun 3, 2014 4:36pm BST

Builders work on a new building being constructed in the foreground of the Canary Wharf financial district, seen from the O2 Arena on a foggy morning in East London March 30, 2014. REUTERS/Andrew Winning

Builders work on a new building being constructed in the foreground of the Canary Wharf financial district, seen from the O2 Arena on a foggy morning in East London March 30, 2014.

Credit: Reuters/Andrew Winning

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LONDON (Reuters) - Britain's construction sector cooled further last month but there were signs that the industry was struggling to keep up with still strong demand, a survey showed on Tuesday.

The Markit/CIPS UK construction PMI eased to 60.0 in May, its lowest level in seven months, from 60.8 in April.

It was the fourth month in a row that the pace of growth eased after hitting a six-and-a-half-year high in January.

Britain's construction industry was hit hard by the financial crisis but has been recovering since last year thanks to record-low interest rates, government programmes to encourage people to buy new homes and falling unemployment.

The Markit index has now been above the 50 threshold denoting growth for 13 straight months.

Nonetheless, the pace of home-building has lagged demand, pushing up property prices and raising concerns at the Bank of England about risks from the housing sector for the economy.

The BoE has said it will try to fend off any risks from housing through mortgage controls before it resorts to higher interest rates.

Markit said housebuilding remained the best-performing sector of the construction industry last month. Commercial building was its slowest in seven months.

Markit said the May survey showed longer lead times for suppliers were causing bottlenecks and pay rates for contractors rose at their steepest pace since the survey began more than 17 years ago.

"With supply constraints still persisting, there are some concerns about how this prolonged period of growth can be sustained over the course of 2014," said David Noble, chief executive at the Chartered Institute of Purchasing & Supply.

The construction industry remains about 10 percent smaller than before the financial crisis, Markit said.

A similar survey on Monday showed strong growth in British manufacturing continued last month.

(Writing by William Schomberg; Editing by Susan Fenton)

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